How do I get the Best Line of Credit?

Obtaining the best line of credit typically is a matter of matching a borrower’s ability to repay a loan with a lender who is willing to lend under terms acceptable to all parties. Exactly what comprises the best line of credit will vary based on the borrowers’ financial condition and needs. At a minimum, borrowers will need a demonstrated ability to repay the loan, provide adequate security, and fully complete loan application package.

A line of credit differs in some regards from a traditional loan, and these differences can affect what the best line of credit for business or personal borrowers. In a traditional loan, a set amount of money is advanced for a specific purpose with repayment occurring in set amounts over a predetermined time period. A line of credit is the approval to periodically draw from a pre-agreed sum of money that can be used flexibly by the borrower for a variety of purposes. Borrowers repay only when they have accessed the line of credit.

In obtaining the best line of credit, borrowers typically desire to have access to the largest amount of money, repayment terms at the lowest interest rate, with low fees and penalties, if any. Lenders will evaluate a borrower based on a review of the previous two or three years of financial performance, the credit score, and collateral for the loan the borrower can provide. Having a prior relationship with a lender can help a borrower get the best line of credit, too.

The process generally begins with the borrower knowing what the lender requires. This means getting a loan application and matching the lender's criteria to the borrower’s current financial condition. If there is a financial issue, the borrower should attempt to correct it before filing the application or be prepared to offer an explanation as to how it can be overcome or is not relevant.

Lenders typically will want to see the borrower’s profit or discretionary income at a certain percentage above expenses. Collateral in the form of property or other assets is usually required at a certain percentage of the amount of the line of credit. A guarantor, i.e., another person who agrees to repay the loan if the borrower defaults, can be helpful here if sufficient collateral is unavailable. A good borrowing history, often reflected in a business or individual credit score, can help the borrower negotiate for best terms on rates and fees as well.

All of the information required by the lender usually is set forth in the application for the line of credit. Borrowers must make a full financial disclosure on the application form. It should be prepared in a professional, forthright manner with ample documentation of income and liabilities. The combination of a solid, professional application and a strong financial position is a good route toward getting the best line of credit.